/NOT FOR DISSEMINATION IN THE UNITED
STATES OR FOR DISTRIBUTION TO UNITED
STATES WIRE SERVICES/
EDMONTON, AB, June 16, 2020 /CNW/ - Fire & Flower
Holdings Corp. ("Fire & Flower" or the "Company") (TSX: FAF)
(OTCQX: FFLWF), today announced its financial and operational
results for the thirteen-weeks ended May 2,
2020.
Financial and Operational Highlights for the Thirteen Weeks
Ended May 2, 2020
- Total revenue of $23.1 million
at a gross profit of 32.6%, compared to revenue of $9.5 million in Q1-2019 at a gross profit of
38.5% - representing a 142% increase in revenue
year-over-year.
- 83% increase in wholesale revenue through Open Fields
Distribution in Saskatchewan from
$2.1 million in Q4-2019 to
$3.9 million in Q1-2020.
- Completed two financings for aggregate gross proceeds of up
to $28 million with Green Acre
Capital LP as lead investor and AltaCorp Capital Inc. acting as the
exclusive financial advisor to Fire & Flower. Additionally,
Alimentation Couche-Tard Inc., through an indirectly wholly-owned
subsidiary exercised its participation rights in respect of the
offerings.
- Entered into a commitment letter for an aggregate amount of
up to $10 million with an option for
an additional $5 million for
non-dilutive credit facilities with ATB Financial, the largest
Alberta-based financial
institution.
- Amended the provisions of certain debentures and forced
conversion of all remaining principal amounts and accrued
unpaid interest through the issuance of 12,223,638 common shares of
the Company.
- Maintained business continuity during the COVID-19 public
health crisis through rapidly implementing safety operating
procedures and the ability to continue to serve customers through
the Hifyre Digital Retail and Analytics Platform including the
Spark Fastlane™ "click-and-collect" service, curbside pickup and
home delivery in select provinces.
- Began home delivery in the province of Ontario through the Hifyre™ Digital Retail and
Analytics Platform as permitted by the Government of
Ontario's emergency order.
Subsequent Financial and Operational Highlights post
May 2, 2020
- Hifyre's Spark Perks™ member program achieved the milestone
of more than 100,000 members who are typically more valuable
customers as they exhibit more frequent transactions with higher
basket sizes, compared to non-members.
- Continued to commercialize the Hifyre IQ cannabis data program
through building ongoing monthly recurring revenue.
- Began to realize positive financial and operational results
from the restructuring plan in the Retail Platform as part of
normal-course retail operations announced during Q4-2019.
"Fire & Flower's financial and operational results for
the first quarter, fiscal 2020 demonstrate that the Company
continues to show positive growth quarter over quarter and over its
previous fiscal year. We will continue to work towards positive
operating EBIDTA delivered through four-wall retail economics,"
shared Trevor Fencott, Chief
Executive Officer of Fire & Flower. "The Ontario market presents a key growth
opportunity for the Company and we will continue to focus on all
major markets for private retail across Canada. Both the Open Fields Distribution
Platform and Hifyre Digital Retail and Analytics platform provide
additional independent revenue opportunities for the
Company."
Selected Summary of Financial Results
|
|
Thirteen weeks
ended
|
Statement of Loss
and Comprehensive Loss
|
|
May 2, 2020
($)
|
May 4, 2019
($)
|
$
Change
|
|
%
Change
|
Revenue
|
|
23,122
|
9,538
|
|
|
13,584
|
|
142%
|
Cost of goods
sold
|
|
(15,587)
|
(5,870)
|
|
|
(9,717)
|
|
166%
|
Gross
profit
|
|
7,535
|
3,668
|
3,867
|
|
105%
|
Expenses
|
|
|
|
|
General and
administrative
|
|
8,861
|
6,066
|
2,795
|
|
46%
|
Share-based
payments
|
|
698
|
1,254
|
(556)
|
|
-44%
|
Marketing and
promotion
|
|
176
|
167
|
9
|
|
5%
|
Acquisition and
business development costs
|
|
184
|
-
|
184
|
|
NM
|
Depreciation &
Amortization
|
|
3,025
|
1,474
|
1,551
|
|
105%
|
Impairment
|
|
4,279
|
-
|
4,279
|
|
NM
|
Total
Expenses
|
|
17,223
|
8,961
|
8,262
|
|
92%
|
Loss from
operations
|
|
(9,688)
|
(5,293)
|
(4,395)
|
|
83%
|
Listing
expense
|
|
-
|
(1,835)
|
1,835
|
|
-100%
|
Gain on revaluation
of derivative liability
|
|
3,616
|
1,070
|
2,546
|
|
238%
|
Loss on debt
extinguishment
|
|
-
|
(9,028)
|
9,028
|
|
-100%
|
Interest
income
|
|
61
|
94
|
(33)
|
|
-35%
|
Finance
costs
|
|
(6,727)
|
(2,065)
|
(4,662)
|
|
226%
|
Other
expense
|
|
(3,050)
|
(11,764)
|
8,714
|
|
-74%
|
Net income /
(loss) and comprehensive gain / (loss)
|
|
(12,738)
|
(17,057)
|
4,319
|
|
-25%
|
Net income /
(loss) per share, basic
|
|
($0.08)
|
($0.17)
|
$0.09
|
|
-52%
|
Net income /
(loss) per share, diluted
|
|
($0.08)
|
($0.17)
|
$0.09
|
|
-52%
|
During the thirteen weeks ended May 2,
2020, the Company generated revenue of $23.1 million including sales of $18.4 million in the Retail Platform,
$3.9 million in the Distribution
Platform and sales of $0.8 million in
the Digital Retail and Analytics Platform.
Total gross profit for the thirteen weeks ended May 2, 2020 was $7.5
million or 32.6% of revenue with the Retail Platform
delivering $5.6 million, or 30.3%
gross profit, compared to $2.7
million or 35.1% for the thirteen weeks ended May 4, 2019. Retail and wholesale operations
together delivered $6.7 million, or
30.2% gross profit for the thirteen weeks ended May 2, 2020.
For the quarter ended May 2, 2020,
the Company recorded net comprehensive loss of $(12.7) million, or net loss per share, and on a
fully diluted basis of $0.08. The net
comprehensive loss incurred during the quarter was due to gross
margin of $7.5 million being more
than offset by total expenses of $17.2
million and other expenses of $3.1
million. Total expenses included $4.3
million of impairment charges. Other expenses are comprised
of finance costs of $6.7 million,
partially offset by gains on derivative liabilities.
Retail Platform Update
Throughout the 2020 fiscal year, Fire & Flower anticipates
continuing to build out its retail network, focusing on markets in
Ontario with a significant number
of cannabis consumers. The development of retail stores in the
province of Ontario was affected
by the slowdown in construction due to the COVID-19 public health
crisis. The Company also intends to enter the British Columbia market once final licensing
is complete, and other Canadian markets as regulations permit.
The Company acquired both the Ottawa and Kingston,
Ontario stores that were initially operated under licence
agreements by two Ontario cannabis
retail store licence holders and is now reporting revenue from
these stores. Additionally, the Company has submitted applications
for eight additional cannabis Retail Store Authorizations to the
Alcohol and Gaming Commission of Ontario.
Fire & Flower continues to focus on "four-wall retail
economics" as a key factor in driving towards profitability and has
rapidly adapted to continue serving customers during the COVID-19
public health crisis. Combined with the previously announced
restructuring plan, the Company continues to focus on stores that
are accretive to the business and will continue to evaluate the
performance of its stores based upon data from the Hifyre platform
to maximize opportunities across the retail network.
Throughout Fire & Flower's 2020 fiscal year, the Company
will be focused on continuing to build out its retail network. The
Company intends to prioritize expansion in the Ontario market for the current fiscal year,
and also intends to enter the British
Columbia market once final licensing is complete, and other
Canadian markets as regulations permit.
Since the onset of the COVID-19 public health crisis, Fire &
Flower continued to see meaningful sales with basket sizes
increasing with increased popularity of large format cannabis
products and the decrease of preroll cannabis products. There
continues to be meaningful demand for "cannabis 2.0" new product
formats such as edibles, vapes and beverages.
HifyreTM Digital Retail and Analytics
Platform
During the quarter ended May 2,
2020, the Hifyre Digital Retail and Analytics Platform saw
significant growth in its Spark Perks member program, surpassing
the milestone of 100,000 members.
As consumer interactions with cannabis retail took a digital
focus during the COVID-19 public health crisis, Hifyre rapidly
responded by deploying technologies such as "click-and-collect",
curbside pick-up and home delivery using proven models already in
use in the province of Saskatchewan. With the focus of Hifyre
resources shifted to these technologies during the quarter, the
Company saw a decrease in its digital revenue.
With consumers interacting online, Hifyre saw an increasing rate
of growth of Spark Perks members, which transact more frequently
and spend more per transaction than non-members. The Company
provided a 10% discount to new customers enrolling in the program
which contributed to the decrease in margin but is anticipated to
increase overall customer lifetime value.
During the quarter, Hifyre completed the development of Hifyre
ONE, a white-label software service that will be deployed through
its strategic agreement with COVA Software Solutions and that is
expected to produce an additional independent revenue channel at
high margins.
Open Fields Distribution Platform
The Company continues to operate a cannabis wholesale business
in the province of Saskatchewan,
through its wholly-owned subsidiary 10926671 Canada Inc. ("Open
Fields"). Open Fields purchases cannabis products directly from
licensed producers and distributes those products to both Fire
& Flower and other retailers across the province. Additionally,
Open Fields sources accessory products from global suppliers and
distributes those products to Fire & Flower stores across
Canada.
During the first quarter of fiscal 2020, Open Fields revenue
increased to $3.9 million from
$2.1 million in Q4-2019, representing
an 83% increase between the two periods.
The growth is attributed to key exclusive distribution
agreements with major licensed producers of cannabis products and a
representation of key external accounts to many retailers across
the province of Saskatchewan.
Fire & Flower's ability to successfully execute the
Distribution Platform demonstrates how this model can be adapted
for use in other jurisdictions where direct wholesale relationships
with licensed producers and accessory suppliers are permitted.
Adjusted EBITDA
The Company's "Adjusted EBITDA" is a Non-IFRS metric used by
management that does not have any standardized meaning prescribed
by IFRS and may not be comparable to similar measures presented by
other companies. Management defines the Adjusted EBITDA as the
Income (loss) for the period, as reported, before accretion and
interest, tax, and adjusted for removing the share-based
compensation expense, depreciation and amortization, gains and
losses related to derivative liability revaluations and debt
extinguishments, professional fees associated with financing and
acquisition and business development activities, impairment
charges, restructuring costs, and includes lease liability payments
that would have been excluded from profit and loss due to the
application of IFRS 16 accounting standards. Management believes
"Adjusted EBITDA" is a useful financial metric to assess its
operating performance on a cash basis before the impact of non-cash
items. As other companies may calculate this non-IFRS
measures differently than the Company, this metric may not be
comparable to similarly titled measures reported by other
companies. For a reconciliation of Adjusted EBITDA please refer to
"Non-IFRS Financial Measures" in the Company's management
discussion and analysis for the thirteen weeks ended May 2, 2020.
Adjusted EBITDA for the thirteen weeks ended May 2, 2020 was a $2.7
million loss compared to a $3.4
million loss for the thirteen weeks ended May 4, 2019.
|
|
Thirteen weeks
ended
|
Expressed in CDN
$000's
|
|
May 2, 2020
($)
|
May 4, 2019
($)
|
Loss from operations
– as reported
|
|
(9,688)
|
(5,293)
|
Share-based
payments
|
|
698
|
1,254
|
Acquisition and
business development costs
|
|
184
|
-
|
Depreciation &
Amortization
|
|
3,025
|
1,474
|
Professional fees
related to financing activities
|
|
92
|
168
|
Impairment
|
|
4,279
|
-
|
Lease liability
payments
|
|
(1,276)
|
(992)
|
Adjusted
EBITDA
|
|
(2,686)
|
(3,389)
|
Conference Call
Fire & Flower will host a conference call today,
June 16, 2020 at 8:30 AM ET to discuss these results.
Trevor Fencott, Chief Executive
Officer and Nadia Vattovaz,
Executive Vice President, Operations and Chief Financial Officer
will provide a management presentation followed by a question and
answer session with research analysts.
Date:
|
Tuesday, June 16,
2020
|
Time:
|
8:30 AM Eastern
Time
|
|
|
Webcast:
|
|
https://produceredition.webcasts.com/starthere.jsp?ei=1332236&tp_key=64892aff2e
|
|
|
Conference
Call:
|
1-888-390-0546
|
|
|
Replay
Number:
|
1-888-390-0541
|
Replay
Passcode:
|
434490#
|
|
|
Note: Replay is
available until July 7, 2020.
|
Fire & Flower's financial statements and management
discussion and analysis for the period are available on Fire &
Flower's SEDAR profile at www.sedar.com and on Fire &
Flower's website at www.fireandflower.com/investor-relations/.
About Fire & Flower
Fire & Flower is a leading
purpose-built, independent adult-use cannabis retailer poised
to capture significant Canadian market share. The Company guides
consumers through the complex world of cannabis through
education-focused, best-in-class retailing while the
Hifyre™ digital platform connects consumers with
cannabis products. The Company's leadership team combines extensive
experience in the cannabis industry with strong capabilities in
retail operations.
Fire & Flower Holdings Corp. owns all issued and outstanding
shares in Fire & Flower Inc., a licensed cannabis retailer that
owns or has interests in cannabis retail store licences in the
provinces of Alberta, Saskatchewan, Manitoba and Ontario and the Yukon territory.
Through the strategic investment of Alimentation Couche-Tard
Inc., the Company has set its sights on the global expansion as new
cannabis markets emerge.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
INFORMATION
This news release contains certain
forward-looking information within the meaning of applicable
Canadian securities laws ("forward-looking statements"). All
statements other than statements of present or historical fact are
forward-looking statements. Forward-looking statements are often,
but not always, identified by the use of words such as
"anticipate", "achieve", "could", "believe", "plan", "intend",
"objective", "continuous", "ongoing", "estimate", "outlook",
"expect", "project" and similar words, including negatives thereof,
suggesting future outcomes or that certain events or conditions
"may" or "will" occur. These statements are only
predictions.
Forward-looking statements are based on the opinions and
estimates of management of Fire & Flower at the
date the statements are made based on information then available to
the Fire & Flower. Various factors and
assumptions are applied in drawing conclusions or making the
forecasts or projections set out in forward-looking statements.
Forward-looking statements are subject to and involve a number of
known and unknown, variables, risks and uncertainties, many of
which are beyond the control of Fire & Flower,
which may cause Fire & Flower's actual
performance and results to differ materially from any projections
of future performance or results expressed or implied by such
forward-looking statements. Such factors, among other things,
include: final regulatory and other approvals or consents;
fluctuations in general macroeconomic conditions; fluctuations in
securities markets; the impact of the COVID-19 pandemic; the
ability of the Company to successfully achieve its business
objectives and political and social uncertainties.
No assurance can be given that the expectations reflected in
forward-looking statements will prove to be correct. Although the
forward-looking statements contained in this news release are based
upon what management of the Company believes, or believed at the
time, to be reasonable assumptions, the Company cannot assure
shareholders that actual results will be consistent with such
forward-looking statements, as there may be other factors that
cause results not to be as anticipated, estimated or intended.
Readers should not place undue reliance on the forward-looking
statements and information contained in this news release.
Additional information regarding risks and uncertainties relating
to the Company's business are contained under the heading "Risk
Factors" in the Company's annual information form dated
April 29, 2020 and the heading "Risks
and Uncertainties" in the management discussion and analysis for
the fifty-two weeks ended February 2,
2020 filed on its issuer profile on SEDAR at
www.sedar.com.
No stock exchange, securities commission or other regulatory
authority has approved or disapproved the information contained
herein.
Fire & Flower assumes no obligation to publicly
update or revise forward-looking statements to reflect new
information, future events or otherwise, except as expressly
required by applicable law.
SOURCE Fire & Flower Holdings Corp.